OPEC expected to propose 500 m b/d increase

The president of OPEC, Sheikh Ahmed Fahed al-Sabah, is expected to propose increasing quotas for crude oil output by 500,000 barrels a day at the meeting that starts today.

However, at the same time he noted that there was a “big surplus” in supplies of crude but that despite this, price are still increasing.

OPEC as a group is already producing above the most recent quotas set in July, but in reality not all members can produce as much as their quotas allow.

OPEC’s current quota is 28 million b/d and it is currently producing 28.4 m b/d. This excludes Iraq, currently producing over a million per day, but which is not subject to quotas.

Bottlenecks at the “product” end–namely at the oil refineries–have kept oil prices high this year, rising to a peak of over USD 70/barrel in late August, but easing since.

Lack of capacity at oil refineries outside the OPEC countries, combined with strong demand, has made oil prices vulnerable to any perceived risk to supply.